Know the Difference Between Franchising and Buying a Business
Before you decide if one of these options is right for you, make sure you know the basics of franchising and buying an existing business. The main difference between franchising and buying an existing business is the level of control you’ll have over your business.
Franchising gives you more guidance, but less control
A franchise is a business model where one business owner (the franchisor) sells the rights to their business logo, name, and model to an independent entrepreneur (the franchisee). Restaurants, hotels, and service-oriented businesses are commonly franchised.
Two common forms of franchising are:
- Product/trade name franchising: The franchisor owns the right to the name or trademark of a business, and sells the right to use that name and trademark to a franchisee. This style of franchising normally focuses on supply chain management. Typically, products are manufactured or supplied by the franchisor and delivered to the franchisee to sell.
- Business format franchising: The franchisor and franchisee have an ongoing relationship. This style of franchising normally focuses on full-spectrum business management. Typically, the franchisor offers services like site selection, training, product supply, marketing plans, and even help getting funding
When you buy a franchise, you get the right to use the name, logo, and products of a larger brand. You’ll also get to benefit from brand recognition, promotions, and marketing. But, it also means you have to follow rules from the larger brand about how you run your business.
Buying an existing business gives you more control, but less guidance
Consider 3 factors before franchising or buying a business
Though the business models differ, there are three common steps to take that will help you determine whether you should franchise or buy a business.
- Quantify your investment:
- Consider your talents and lifestyle:
- Review the full landscape
Click here to connect with your local Center and an advisor if you need additional help understanding how to buy a franchise or an existing business.